Chapter 11 Flashcards
Who might use a financial statement and why?
Owner - see if the business is profitable
Potential buyers - potential of the business
Creditors - business’s ability to pay its debts
Banks - granting of loans/overdrafts
SARS - tax
Manager - make financial decisions
Employees & trade unions - negotiate wages and working conditions
What is important to remember about figures that will be subtracted?
Put these amounts (Cost of Sales, Depreciation, Drawings etc.) in brackets
What will give you the gross profit?
Net Sales- Cost of Sales
What will give you the gross operating income?
Gross profit + other incomes
What will give you the operating profit?
Gross operating income - operating expenses
What will give you the profit before interest expense?
Gross operating profit + Interest Income
What will give you the Net Profit?
Profit before interest expense - Interest expense
How do you work out Net Sales?
Sales - Debtors Allowances
How are financial statements divided?
Income statement section
Balance sheet section
What does the Income statement show?
All the incomes and expenses of a business (Nominal accounts)
What does the Balance Sheet statement show?
Assets, Owners Equity and Liabilities
What are the two kinds of assets?
Non-current
Current
What are the non-current assets?
Fixed/ tangible assets
Financial assets
What are financial assets?
Fixed deposits maturing after 12 months
Investments
What are the current assets?
Inventory
Trade and other receivables
Cash and cash equivalents
What goes under Equity and Liabilities?
Owners equity
Non-current Liabilities
Current liabilities
What are the non-current liabilities?
Loans repayable after 12 months
What are the current liabilities?
Trade and other payables
What are the eight notes called?
- Interest income
- Interest expense
- Fixed / Tangible assets
- Inventory
- Trade and other receivables
- Cash and Cash Equivalents
- Owners Equity
- Trade and other payables
What goes into note 4?
Trading Stock
Consumables on Hand
What goes into note 5?
Trade Debtors ( Debtors Control)
Accrued Income
Prepaid Expenses
What goes into note 6?
Fixed deposit maturing within 12 months Savings account Bank Cash float Petty cash
What goes into note 7?
Capital balance at the beginning of the year (you may need to subtract additions from the amount in the trial balance)
Net profit / Loss for the year ( total from income statement)
Additional capital contributions
Drawings
What goes into note 8?
Trade Creditors (Creditors Control)
Loans repayable within 12 months
Accrued expenses
Deferred income
What goes into note 3?
Land and buildings
Vehicles
Equipment (including computers)
The depreciation of these things
